Rental Market in Chicago starting to slow?

Is the rental market in Chicago starting to slow? I have yet to run any statistical analysis from the MLS regarding rental data but my pulse on the market has accurate in the past and now I’m getting the feeling that the rental market is starting to slow. The fall is always a slower time to rent and December will be even slower than previous months, but I have noticed activity slow in the market place in comparison to last year.

While I have seen rental activity slow I have seen buyers come out of the woodwork, many of whom plan to buy this winter!

What do I believe is causing the slow down? I think we are seeing more renters turn into buyers. This is evident by inventory levels of homes for sale decreasing month after month in Chicago. The rental market slow down I speak of is only very minor. Prices are still at record highs and rentals are still renting quick but when I am starting to get the sense that rental prices are hitting a plateau. In Chicago we will see over 3,000 rental units hit the market in the coming year. While all these rental units target the class A downtown rental market (studios near 2,000/mo, 1 beds from 2,500, etc) other rental markets such as Lakeview, Lincoln Park, etc. can still feel the impact of increased inventory levels if a price war ensues downtown.


Leasing Continues to Heat Up

Leasing continues to heat up in Chicago. Many of us have read the articles about the uptick in the residential leasing market. Whether it is CNN or a local business paper it appears to be the buzz all over. With the jobs market rebounding and the economy becoming more stable, the average renting is expanding their comfort zoning. They are ditching their roommate, splurging for a 1 Bed instead of a studio, or upgrading to granite over laminate. However, what are the actual numbers. We hear research companies talking about % increase in the double digits for the next year or two, we hear them talking about supply decreasing and renter demand shoot through the roof. The “IN” thing now is to talk about climbing rental prices, no one wants to read of anything different. It turns out, they are completely accurate, at least for the time being.

Personally, I have seen an uptick in rental demand with my own business. One of our developments in Wicker Park has seen a huge influx of showings and we’ve leased out more units in the past 3 months than we have since we acquired the development. But, I wanted to take my blinders off and look at the numbers, so I did. Here is what I found.

I did a search on the MLS only. I searched 3 different months: April, March, and February. I also kept the search to AREA 8008 in the MLS which covers only the downtown market. These neighborhoods are Streeterville, Gold Coast, River North and Old Town (South of North Avenue). Here is the data I discovered:

April 2011: 256 units leased $2,199/averageĀ  vs. April 2010: 342 units leased $1,869/average 17.66% Increase

March 2011: 262 units leased $2,188/average vs. March 2010: 249 units leased $1,982/average 10.44% Increase

February 2011: 218 units leased $2,145/average vs. February 2010: 137 units leased $1,927/average 11.31% Increase

Overall, when we look at each month on the same level (to take into account different amounts of units leased) we see an increase in rent prices for February through April of 13.18% from the same period in 2010.

Furthermore, we have seen people renting earlier this year. It appears that many more people wanted to get an early start on renting their next home, probably mainly due to the hype the media was creating over the heat of the rental market. I’ve also personally noticed that many more tenants are much more flexible on their move in date. They are willing to have their leases overlap in order to secure the place they really want versus fighting to find the place that will allow them to change from one place to the next without wasting money on renting two places at the same time.